Like many soon-to-be retirees, Tanja Hester and Mark Bunge can’t wait to travel the world. But unlike most of their retired peers, the couple won’t enjoy any senior discounts along the way. That’s because Hester is 38, and Bunge is just about to turn 41.
The California couple, who have blogged anonymously about their plans at their popular blog, Our Next Life, have shared their identities with MONEY ahead of revealing them on Monday. They plan to retire from their jobs as consultants for political and social causes at the end of this year.
Hester also shared how she and her husband have amassed enough money to retire decades before the traditional ages of 62 or 65.
Aim for 50%
“For us, most of the success has been automating everything and hiding money from ourselves,” Hester says. “If you think about the money too much, you’re liable to do something dumb.”
When your money is automatically deducted from your paycheck and deposited into your savings, you don’t get used to having it. You don’t have to fight the impulse to spend what you don’t see. What’s more, if you bank your raises, you’ll avoid the phenomenon that financial planners call “lifestyle creep,” or adjusting your spending upward — buying a fancy new car, for example — with each bump in your salary.
The couple has been saving seriously for early retirement for nearly six years, and began plowing more than half of what they earned into their savings accounts. Their one measure of extreme frugality? Setting their thermostat to a brisk 55 degrees in winter; they live in the North Lake Tahoe area, where in winter the average high temperatures are in the 40s and the lows are in the teens. Otherwise, their high incomes — both make in the six figures — enabled their high savings rate, as did the fact that they have no children.
Their savings grew, buoyed by the 77% in gains the stock market has seen over the past five years. They declined to reveal the size of their nest egg but say it should be enough to sustain them even under a worst-case scenario like a prolonged slump in the stock market. Their retirement income projections don’t rely at all on Social Security —while they do believe the government program will be around in some form when they reach traditional retirement age, they’re going to consider anything they receive from it “gravy.”
Their only regret is not opening up a Roth IRA before their income surpassed the Roth eligibility limit, which for 2017 is $196,000 for a married couple filing jointly. “We’re probably the only early retirees in America without a Roth,” Hester says.
Early retirees who tap their traditional IRA or 401(k) before the age of 59 ½ face a 10% early withdrawal penalty, unless they qualify for a limited number of exemptions. Contributions to a Roth, however, are taxed at the point of entry and can be withdrawn penalty-free at any age. Hester and Bunge have a taxable brokerage account that they can tap without penalty, but they’ll have to pay capital gains taxes on any appreciated stocks that they withdraw, whereas they generally wouldn’t have owed capital gains in a Roth.
Discover the Fun Side of Saving
The couple didn’t start out as mega-savers. When she began her career, Hester had an entry-level salary and debt to match, from credit cards, student loans, and a car loan. “I’m not a person who would save money just to save it,” she says.
Hester’s evolution came about gradually. She and her husband love the outdoors, and as much as they enjoyed their jobs and their colleagues, they could always imagine doing other things with their time. Then Hester learned she carried a gene for the degenerative neuromuscular disability that her father has, which meant the possibility of much-reduced mobility in her 50s and beyond. “I didn’t want to spend all of my able-bodied years working,” Hester says.
Once they identified early retirement as a goal, saving and learning about investments became fun, Hester says. She’d read studies online to learn about topics like inflation; that caused her to increase her portfolio’s allocation to stocks, which generally provide more growth than bonds.
While she and Bunge were able to turbo-charge their savings due to their high-incomes and lack of child-related expenses, Hester stresses that anyone can do what they did and reach early financial independence — it just might take others longer to accomplish.
Embrace Your Inner ‘Dirtbag’
Retirees of any age have to look beyond the money and consider what they’ll do all day. Travel is great, but most people aren’t going to spend every day of their retirement on the road. Those who stop working young might have to focus a bit more on their social lives, since most of their friends will still be punching the clock and unavailable for, say, a weekday brunch or hike.
Hester and Bunge have given a lot of thought to how they’ll spend their days. It’s one reason why they live in a ski town. The Lake Tahoe area is home to many people working un-traditional jobs, with un-traditional schedules, she says.
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What’s more, people in their area tend not to spend money when they socialize. Instead of going out to eat, they might pack a picnic and go for a hike. “There’s not a culture of spending,” she says. She and her husband plan to spend plenty of time hiking after they stop working.
They’re also planning to take three to four international trips a year, but on the cheap. They’ve racked up three million travel rewards points, mostly through work travel, and they plan to use them for back-packing trips abroad. “We call this phase, ‘our dirtbag phase,'” Hester says. Once they reach age 60 and begin tapping the tax-deferred savings in their 401(k)s, they plan to take their travel standards up a notch.
Early retirement may seem like a dream, but both temperamentally and financially it’s not for everyone. Hester and Bunge have put together 10 questions for people considering following in their footsteps.